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CME Seeks Corn Limit Increase

CME Group is trying to allay some criticism over its proposal earlier this year to increase the daily price limit for corn.

The derivatives giant previously proposed increasing the daily price limit for Chicago Board of Trade (CBOT) corn futures from the current 30¢ to 50¢. Earlier this month, the Chicago Mercantile Exchange (CME) replaced that proposal with one calling for an increase in the daily price limit to 40¢ instead.

Understandably much of the opposition to the original proposed price increase – and likely the new one as well – comes from those with commercial interest as opposed to non-commercial or speculative ones. The argument is that an increase in the daily limit increases margin calls and broadens price volatility.

Tim Andriesen, CME Group's managing director of ag commodities and alternative investments, explains, “It's important that markets trade allowing for price transparency and risk transfer and that limit moves are infrequent so as not to prevent price discovery. At the same time, we recognize wider limits have an impact on many of our commercial customers. After significant discussion with customers and representative trade groups, we've reduced the proposed increase to 40¢/bu., which is a level we believe balances those two concerns.”

In order to be enacted, the proposal would have to be approved by the Commodity Futures Trading Commission.